Expanding Partnerships for Small- and Medium-Sized Enterprises (SMEs) Needed: The Right Kind of Support

by Marjorie M.K. Hlava

Small- and medium-sized companies are the growth generators for economies worldwide, the frequent incubators of ideas and
inventions and the basis of the U.S. economy. Ninety percent of new jobs in the United States are generated through small- and medium-sized (SME) enterprises. Most businesses fall into this category. Therefore, governments
(federal, state and local) are interested in helping to make them successful. Big business also is interested in SMEs because of the ideas and technology they generate. Many large businesses grow from the acquisition of smaller
firms. So it is natural to ask whether the existing services and businesses that purport to help SMEs do an adequate job and how they might do it better.

Characteristics of SMEs

SMEs are characterized by
their focus -- what is particularly important to them -- and by the style and preferences of the entrepreneurial owners. So, what is important to SMEs?

First, cash flow. If you don't know what cash flow is, then
you have never run a business. There is no question in any small business owner's mind that cash flow is the key to success. If you don't keep your eye on the cash -- not the financial statement, the cash (as in how much came
in today and what amount went out today and this week and this month) -- then you won't be in business very long. In this environment where businesses live and die by cash flow, budgets are created as guidelines and are made to be
broken. Because it is too hard to predict cash flow, most small businesses don't operate on a real budget. You cannot say, with certainty, that you are going to get a payment from any particular client by any certain date. Big
business and government are particularly slow to pay. So you operate on projected budgets or on educated expectations or predications.

Second, mission. You must keep your eye on the ball and keep the company
focused on its mission, its goals and its objectives. It is very easy to get distracted by other issues, many of which are very interesting -- and very costly. The company's driving force and raison d'κtre must remain flexible to
meet the demands of the marketplace as well as to keep within the bounds of the original mission.

Finally, the nature of entrepreneurs
is important to SMEs and, particularly, to anyone hoping to help them. Entrepreneurs need to be treated a little differently. Much has been written about entrepreneurs, noting both good and bad characteristics. The following list represents my thoughts on what they are, based on my experience as an entrepreneur.

Idea generators. If you're in a room with a group of entrepreneurs, the ideas flow freely and in abundance.

Stubborn and tenacious.
If you are going to retain your focus in the face of bad cash flow and keep your eye on the ball, then you better be both stubborn and tenacious.

Impatient. You'll often see entrepreneurs tapping their
feet and pacing around in the back of the room as they await the opportunity to "get on with it."

Risk-takers.
They will tell you, "Well, let's try it!" They are not status-quo people. They do not follow the party line; they ask questions; they tend to march to a different drummer.

Initiators.
They definitely start things.

Performers. Because they are stubborn, they generally finish what they start.

Psychological studies show that entrepreneurs share other common traits that are well
documented and can be read in the literature. For instance, they generally are first-born and they have had to deal with some sort of adversity in their youth.

Entrepreneurs also tend to exhibit the following traits:

they are somewhat rebellious or, depending on your point of view, impulsive;

they do not color inside the lines and tend to think "outside the box";

they tend to see things with a different point of view; and

quite frequently, they are dyslexic, upside-down thinkers.

Types of Help Available to SMEs

Let's take a look at the most common types of help offered to the small- and medium-sized enterprises by those organizations that are set up to help them.

Real estate agents are always willing to show and to let space to businesses of any size and kind.

Banks make loans to SMEs.

The Small Business Administration and similar state and local groups provide lists of contacts for advice or marketing.

Franchisers and others spew out a multitude of advertisements of business opportunities. You know the ad: "You, too, working out of your home, can make a zillion dollars." Even the Web has them coming across the line these
days.

Governments and trade associations offer trade missions through which you will meet important government officials of other countries.

There are also sometimes wage and tax incentives.

What's the Problem?

All this isn't nearly as good as it sounds. The advice that is available for SMEs is canned. It is pre-packaged, "one size fits all."

The promised introductions
are actually just lists of people for whom you leave voice mail when you call. Frequently, these are very long lists of unknown people. The agencies often create them based on printed checklists that the small business owner fills
out. Without introductions contacting someone on the list is just a cold call, like the ones you get at dinnertime. Hosted small lunches would be much more effective.

The trade missions are at your expense, of course,
and those wage and tax incentives are usually matching funds and never free money. In most instances, it's big business that can take advantage of the tax incentives, not the SMEs.

Any help that is offered
often requires the SME to prepare an elaborate business plan, which, like their budgets, will bear little resemblance to reality. Small businesses, as a rule, don't create business plans for internal consumption since their
environmental factors change so frequently that they can't follow them for very long.

And the help is hardly free. Even as SME owners go through the convoluted processes required to request assistance, they often don't
know if they are going to wind up at a tollgate at the end. Also, it takes a long time to get the paperwork through. There are a lot of bureaucratic response channels. The procedures required by these agencies and businesses are
difficult for everyone, but particularly so for entrepreneurs and SMEs. Response time to applications or requests is slow -- typically 6-8 weeks. All this labor costs a lot of money. It's an expensive undertaking.

Suppose you grit your teeth and do all the paperwork, what then? For loans, leases, credit cards or a line of credit, you need to pledge all of your personal possessions: your house, your bank accounts, your car -- your children
unto the third generation. You also have to turn over all of your personal financials and, if you're one of those stubborn, tenacious entrepreneur-types, you're not too pleased about people getting into your private life. This
issue, alone, stops many people from going forward.

In sum, the problems begin when people who always have worked within the governmental bureaucracies or within big business try to help groups that they really do not
understand on either an emotional or a business level. Not only have many people in these organizations never worked in a small business but their college courses were taught by professors who never worked in that environment.
Their reality is not ours.

Two Examples of the Problems

Let's look at two examples of the problems: first at how contacts really work and second at the bureaucracy surrounding minority set-asides.

Contacts in the Real World. The figure on this page shows a page of an actual standard list put out by the Small Business Administration in Albuquerque. It says in one place that you should meet with all
the people on this list. The list is seven pages long. One entry, for instance, directs us to a certain person at Phillips Lab at Kirtland Air Force Base from whom we can get a list of their procurement directors. There are also
contact people at DOE, Sandia Labs, etc. Many times, if you call the people listed, they will refer you to someone else.

One of the items on the list leads to a Web page shown in the figure on this page. Here's the
Procurement Assistance Jumpstation, a very proactive term. Sounds good. However, eight clicks later, when we finally reach an actual bid opportunity that looks interesting, we run into "Login required:
." You have to be tenacious to use these systems!

Minority Set-Asides. Another example of what happens within entrepreneurship is the SBA category called the 8A Set-Aside. If you are a woman-owned
business or American Indian -- and I am both -- or another minority group, you can apply to file for an 8A set-aside. The owner meeting the criteria has to own or control at least 51% of the business. So in our case we got
the paperwork, completed it and submitted it. The first time we submitted, the SBA told us that the ranks were full, and they didn't need additional small businesses as set-asides. So we waited a couple of years and went through
the entire process again. This time the response was that we had to have the forms filled out by someone who knew how to do it. It would cost us only $3,000 to get the stamp of approval by such an organization.

The
message is that even though we are from among the groups that can qualify for an 8A set-aside designation, we are obviously not qualified to fill out the forms. So we didn't do it. People periodically ask me why we are not an 8A
company. That's why!

What Assistance Do Entrepreneurs Really Need?

What kinds of help would owners of SMEs really like to be provided? Among other things, we need the following:

a confidant  a listener, a sounding board;

real contacts  not a relay race that takes us to contacts or forms that get us to the next person who may or may not be the right person. We need someone or something that provides a procedure that introduces us to these
contacts. Real contacts are people with whom you can make a deal. That's one of the purposes of marketing  to identify over time some real contacts for possible leads and sales.

a podium to explain a product  a deal-making session or something similar  so we can find out about other people who are doing similar things with whom we might be able to joint venture;

practical advice on banking, legal restrictions, what we can and cannot do, regulations, etc., targeted to our type of business;

advice as a discussion, not a lecture  advice that hits a particular space, that fills a particular blank that we need completed;

line of credit instead of investment money that takes a portion of the business;

investment  but only when the time is right. Not too early, when the plan is still forming; not too late, when enthusiasm for the product or service is still high. This is a difficult balance to achieve because small
businesses are usually short on cash and on marketing contacts, especially at start up time.

joint ventures  where the new partner brings marketing contacts and cash, the two things most SMEs are short on;

marketing and contacts  release of products to market once development is done requires a marketing plan and a different type of contacts. This is a crucial shift in the business life cycle.

SMEs Are Different

I reiterate that, by and large, what works for big companies does not work for small companies. People in small business need immediate help; they cannot wait a year-and-a-half.
They need help that is forthcoming within a couple of months or less. Owners of SMEs need immediate help before the cash that they have disappears and they are hanging on by a thread. This happens all too frequently to small
businesses. Most of those that go under, go under because they didn't get cash in the timeframe it was needed. Maybe they weren't supposed to. There's the element of survival of the fittest here.

They need help before
the "lookers" (organizations and investment bankers who are investigating the company) lose interest and go onto something else, which frequently happens. Many of the "lookers" do a lot of browsing. They dangle attractive
possibilities in front of small businesses. The SME owner just knows that guy will call him back, but he doesn't ... and time runs out.

Entrepreneurs need to be handled in a very proactive manner, not a bureaucratic
manner. Handing them a pile of forms to fill out is enough to make them say, "I'm out of here. I don't want to deal with that."

To summarize, if you want to help SMEs, try the following:

Target your advice

Shorten the timelines

Give real information

Monitor when possible

That's what will help the SMEs.

Marjorie M.K. Hlava is president and chairman of Access Innovations, Inc. She can be
reached there by mail at P.O. Box 8640, Albuquerque, NM 87198-8640; by phone at 505/256-1080; or by e-mail at mhlava@accessinn.com
.